Stacey expects DFS full year profits to top £105m
Despite its stores being closed, DFS still has an order bank £65m higher than normal to work through, reflecting its online success.
DFS sales rose by 21% to £454.9m and profits climbed 35% to £143.2m in the six months to 27 December. Foam shortages and shipping disruption limited Sofology’s sales growth to 10.3% at £112.6m and profits up 35.5% to £31.3m. Online sales jumped from 18.4% of sales to 25.7%.
Group pre-tax profits rose from £15.9m to £72.1m, helped by the drop-through effect of high revenue growth, cost control and lower retail rates payments. The group has not used the furlough scheme.
‘This strong first half profit and cash flow performance is a true reflection of the supreme efforts put in by our teams right across the group since the start of the pandemic. I am hugely grateful to every colleague for their constant focus on the safety, health and wellbeing of all their colleagues and also our customers. Our business has proven to be resilient throughout the period despite showroom closures and a significant amount of external disruption in our supply chains. The investments we've made in our digital channels have generated exceptional revenue growth. Consequently our order bank remains well above normal levels and, subject to showrooms reopening by 12 April 2020, our central planning scenario is for an expected full year profit before tax outcome of approximately £105m, with further benefits to be realised in next year's financial results,’ says Tim Stacey, DFS Group ceo.
‘We're committed to our strategy to lead sofa retailing in the digital age with our proven integrated retail model. We expect to see a good level of activity in the home market as Covid-19 restrictions ease and, having accelerated the execution of our strategy and grown our market share, we are well set for future growth.’
The group said it planned to increase investment in its UK manufacturing by £12m-£15m over the next two financial years. Its five factories, which employ 950 people, produces a fifth of its orders, with another 20% being produced by other manufacturers.
‘There are many benefits from manufacturing our own sofas including: greater supply chain transparency, increased control over lead times, product differentiation and innovation, superior quality control, the ability to flex capacity around peaks in demand, as well as manufacturing margin benefits. We are currently refining our investment plans for our manufacturing operations. However, our early feasibility work is clear that, in addition to delivering a range of operational benefits consistent with our ESG targets and customer proposition ambitions, an attractive financial returns opportunity exists,’ it says.